The regent, moreover, having great faith in Law's abilities, and in his wealth, converted his private bank into a royal one—made it, in short, the Bank of France. This bank was then allied with the two great commercial companies of the time—the East India and the Mississippi. Great privileges were bestowed on each. The latter had the exclusive monopoly of the trade with Louisiana, and all the countries on the Mississippi River, and also of the fur trade in Canada. Louisiana was then supposed to be rich in gold mines, and great delusions arose from the popular notion.
The capital of this gigantic corporation was fixed at one hundred millions and Law, who was made director-general, aimed to make the notes of the Mississippi Company. company preferable to specie, which, however could lawfully be demanded for the notes. So it was settled that the shares of the company could only be purchased by the paper of the bank. As extravagant hopes of gain were cherished respecting the company, its shares were in great demand. And, as only Law's bank bills could purchase the shares, the gold and silver of the realm flowed into Law's bank. Law and the regent had, therefore, the fabrication of both shares and bank bills to an indefinite amount.
The national creditor was also paid in the notes of the bank, and, as unbounded confidence existed, both in the genius of Law and in the profits of the Mississippi Company,—as the shares were constantly in demand, and were rising in value,—the creditor was satisfied. In a short time, one half of the national debt was transferred. Government owed the bank, and not the individuals and corporations from whom loans had been originally obtained. These individuals, instead of government scrip, had shares in the Mississippi Company.
And all would have been well, had the company's shares been valuable, or had they retained their credit, or even had but a small part of the national debt been transferred. But the people did not know the real issues of the bank, and so long as new shares could be created and sold to pay the interest, the company's credit was good. For a while the delusion lasted. Law was regarded as a great national benefactor. His house was thronged with dukes and princes. He became controller-general of the finances—virtually prime minister. His fame extended far and wide. Honors were showered upon him from every quarter. He was elected a member of the French Academy. His schemes seemed to rain upon Paris a golden shower. He had freed the state from embarrassments, and he had, apparently, made every body rich, and no one poor. He was a deity, as beneficent as he was powerful. He became himself the richest man in Europe. Every body was intoxicated. The golden age had come. Paris was crowded with strangers from all parts of the world. Five hundred thousand strangers expended their fortunes, in hope of making greater ones. Twelve hundred new coaches were set up in the city. Lodgings could scarcely be had for money. The highest price was paid for provisions. Widow ladies, clergymen, and noblemen deserted London to speculate in stocks at Paris. Nothing was seen but new equipages, new houses, new apparel, new furniture. Nothing was felt but universal exhilaration. Every man seemed to have made his fortune. The stocks rose every day. The higher they rose, the more new stock was created. At last, the shares of the company rose from one hundred to twelve hundred per cent., and three hundred millions were created, which were nominally worth, in 1719, three thousand six hundred millions of livres—one hundred and eighty times the amount of all the gold and silver in Europe at that time.
In this public Popular Delusion. delusion, the directors were wise enough to convert their shares into silver and gold. A great part of the current coin in the kingdom was locked up in the houses or banks of a few stockjobbers and speculators.
But the scarcity of gold and silver was felt, people's eyes were opened, and the bubble burst, but not until half of the national debt had been paid off by this swindling transaction.
The nation was furious. A panic spread among all classes; the bank had no money with which to redeem its notes; the shares fell almost to nothing; and universal bankruptcy took place. Those who, a few days before, fancied themselves rich, now found themselves poor. Property of all kinds fell to less than its original value. Houses, horses, carriages, upholstery, every thing, declined in price. All were sellers, and few were purchasers.
But popular execration and vengeance pursued the financier who had deceived the nation. He was forced to fly from Paris. His whole property was confiscated, and he was reduced to indigence and contempt. When his scheme was first suggested to the regent, he was worth three millions of livres. He had better remained a private banker.
The bursting of the Mississippi bubble, of course, inflamed the nation against the government, and the Duke of Orleans was execrated, for his agency in the business had all the appearance of a fraud. But he was probably deluded with others, and hoped to free the country from its burdens. The great blunder was in the over-issue of notes when there was no money to redeem them.
Nor could any management have prevented the catastrophe.